Abstract: Generally, the study on returns to education started from the human resource theory advanced in the 1960s. Later, the screening theory and labor market segmentation theory have also been referred by this study. The classical Mincer equation assumes that the personal income is only affected by years of education and work experience. But in reality it is also affected by diploma signal, occupational factors and family background. By analyzing various factors which impact on returns to education, we can not only get a more exact rate of returns to education, but also can find values behind such numbers. The research result is that diploma signal, occupational factors and family background all have influence on China’s rate of returns to education. Impacts from occupational factors are the most significant, followed by family background, and the third is diploma signal. All this shows that China’s labor market is segmented, family capital can promote the rate of returns to education, and education mostly plays a screening role in China’s highend labor market.